Policy | Research | Media

The end of excuses

Try pointing across the table now (Photo: REUTERS/Dalati Nohra/Handout)

Exactly five months to the day that Lebanon’s last cabinet fell, a new one was formed last month on June 12. The abrupt formation after months of impasse took many onlookers by surprise and the reasons for the long-awaited but little-expected conclusion will no doubt continue to be debated for some time to come. Was it the insistence of Hezbollah to come to terms on how to split the pie, Prime Minister Mikati’s realization that he could not wait for the outcome of the Syrian uprising to see which side he would take, or merely that the daily loss of credibility that came with being unable to form a cabinet of supposedly ‘one color’ was no longer acceptable?

In any case, the Lebanese will have to play the cards they dealt themselves the last time they went to the ballot boxes. Let us not forget that we choose the MPs who voted in the last cabinet, and who chose Mikati to form this one; talking about coups is little more than crying over spilt and rotten milk. But, to see this government and its organs for what they are, and what they can realistically achieve, some deep reflection need occur.

The first order of business is a revision of our political definitions.

In 2005, between the assassination of former Prime Minister Rafik Hariri and our Syrian neighbors kindly withdrawing their army from our lands, we divided ourselves into two seemingly equal and persistently fractious parts. What may have been an apt way to represent the diverging points of view that March should not continue to be the basis by which we see this new government; to do so is to fall into the same duplicitous trap appealing to one or the other of two opposing monolithic ideological constructions.

Thanks largely to the ever-capricious Druze leader Walid Joumblatt, political movements March 14 and March 8 are now irrelevant semantic exercises. When you actually study the proposed public policies (where they exist) of the new cabinet’s de facto technical policymaking body, the Free Patriotic Movement, they do not differ greatly from the previous government’s policies.

Both advocate private sector participation in electricity and water; neither have real solutions for, or objections to the cartels they control in almost every sector of the economy — evident in the lack of interest in policies that would encourage entrepreneurship and erode the oligopolistic nepotism that sustains inflated pricing.

We should also be realistic about how much can be achieved when we continue to appoint ministers to our cabinets who have kept our economy at the mercy of cabals, affluent family networks and companies. It is not about how monochromatic your political palate may be, but that the same structure will produce the same results.

However, for the first time in a long time in Lebanon, today we have the semblance of a normal political landscape — a government and an opposition — and that is something we should seek to maintain. What the post-Syrian occupation period has taught us is that national unity governments do not work for two very simple reasons: ties to foreign actors trump nationalism and unity of purpose does not exist.

This time, the cabinet cannot point across the table as easily as it has in the past and say things are not getting done because “they don’t let us.” Even if there is sedition in the ranks — and we should expect some given the amount of bickering we have already seen from those supposedly on the same side — this should not delay the key policy decisions that need to be made from now until the 2013 elections.

The measure of this cabinet will be whether it can make decisions, for good or for ill, rather than crumbling from within. The cabinet’s first achievement — the drafting of a policy statement — should be viewed as little more than a publicity stunt; in practice, policy statements fail to represent anything the population can hold a government accountable for (just look at the last one for a case in point).

The next step will likely be to purge the ministries of opposition supporters in “Grade 1” posts and below. Such action is normal in any democratic society — not a “confrontation” as the opposition paints it — and allows the opposition to criticize and appeal to the population while washing their hands of any blame for stalling the implementation of policies from within. It seems clear at this point that the government will not use the courts to go after members of the opposition, most likely in order to keep their own skeletons safely out of sight. Therefore, the only thing that a true opposition would have to fear is if something were to be accomplished and the government received credit.

This will not be easy to come by. Lebanon’s problems are so deeply engrained in the sectarian and administrative system that resolving them will need to confront the very core of the status quo. We should not kid ourselves into thinking that in the span of roughly two and a half years that will happen. But what we can hope for is that a policy framework is implemented so that reform can begin to take place. Beyond geopolitics and the Special Tribunal for Lebanon, the country’s domestic problems need addressing, regardless of which camp takes them on. The onus is on the new cabinet. In anticipation of the direction this government’s policies may take, Executive lays out the framework for what needs to be done.

The Economy

The first order of business will be to make sure that purchasing power remains intact. The Lebanese lira cannot be allowed to devaluate, and that means confidence must be maintained. Executive does not agree with all the policies of the central bank, nor does it support in principle the idea that government officials should hold their positions for close to two decades. However, Riad Salameh, the current central bank governor, has maintained a stable currency, managed several major crises — including the financial crisis and the Lebanese Canadian Bank debacle — enjoys widespread political support and, whether it is based on reality or perception, symbolizes confidence in the market.

His term needs to be renewed, but it should be done so in accordance with legal norms and not ‘moving decrees’ or other so-called legal instruments that skew the already very blurry lines between the executive and the legislative bodies of government.

If the new government is not sworn in by the time the governor’s term is up, there is a mechanism whereby power can pass to his vice governors until the cabinet gets its act together, drafts its trivial policy statement, receives a vote of confidence and votes him back into office. At that point, and only at that point, should he be reinstated.

Once this occurs, the central bank needs to be clear about its policies and how much of the debt it is holding, and willing to hold. The debt cannot be monetized further, nor can the central bank continue to step in to be a market-maker whenever the commercial banks do not feel like pitching in. The logic of debt markets maintains that there is a price to pay for inefficiency and bad policies. Eventually, the government has to be forced to make tough decisions, like those occurring in Greece. The longer we wait, the worse it will eventually become in the end.

It is time for a New Deal à la Libanaise between the state and the commercial banks. We accept that if not for them we would have no stability in our money markets, and this would have a disastrous effect on our economy. But at this point, the interest the government pays to the banks is just keeping the debt cycle running, making the government even more ineffective, and increasing the risk for everyone further down the line.

A real renegotiation, not a ‘Paris IV’, between the banks and their largest obligator is in order now that there is a government in place that should be able to make decisions and follow on through, and there is no better person to negotiate this deal than Salameh himself. As fewer loans go to the government, more should go to the private sector in order to drive the engine that generates fair tax revenues to fund this debt restructuring.

We are not advocating that our industries be privatized, as is being suggested to our Mediterranean cousins by the International Monetary Fund and the European Union. Doing so would require a clear and transparent strategy and a government elected with a mandate — not one that emerged from political collapse. It would require an adequate amount of competition. The scope of service coverage would also need to be ascertained, and that cannot happen when we do not know how many people need to be served, much less what their consumption is. Any privatization would require faith in the institutions that would oversee it, and this is still far off at best.

In the meantime, liberalizing industries such as electricity, water, air transport and telecommunications without selling the state’s assets needs to occur in order to build the platform needed to grow out of the present slump, and to create enough jobs to keep the population from emigrating.

Concensus on the census

In order to plan for these reforms we will need to know exactly where we stand. It is no longer acceptable that we do not have accurate or timely readings of basic economic and social indicators such as gross domestic product, inflation, poverty, diseases or even the country’s population. The taboo subject of conducting a simple census must be broached and resolved by this government, with questions of sect removed. An accurate reading of residents’ ages, incomes and other essential population statistics are needed before any government can claim it has a public policy. Once this government knows how many people it will need to serve, it can start planning to do so in a realistic and targeted manner. The starting point will be to use what already exists in terms of public policy plans, then improve and implement them.

Public services, taxes and revenue

The electricity plan passed by the last cabinet should be used as the basis for progress in the sector, which must be unbundled into production, transmission and distribution as planned but without its nepotistic elements. Under the current judiciary and regulatory frameworks, private sector participation in the production and distribution of energy will only result in sectarian overlords exercising more control over local populations through distribution contracts and control over production. That is why the electricity law — which establishes an independent regulator — and others, such as the public private partnership law, need to be enacted and implemented by this government.

The only good thing about the energy shortfall is that there is room to grow in the right direction. Alternative energies such as solar, wind and waste recycling need to be transformed from marketing buzzwords to tangible and transparent industries run by innovators, not sects. If the banks are so keen on ‘going green’, than this is the first energy segment they should fund.

There is no room for waste: all our natural resources must be employed if we are to progress. Our rivers and our seas cannot continue to be dumping grounds for our sewage in a region where water is fast becoming the scarcest resource around. The complications and costs associated with building dams on our perforated geology can only be overcome if we integrate power and water as two industries that are, by force of nature, inextricably linked. Doing so will also allow us to power the plants we need to treat our water so that we do not continue to irrigate our crops with sewage that is creating untold health consequences for the population.

Of course, to build those plants and dams we will need a constant flow of cash and that can only come from one place: the people. Continuing to rely on the debt markets may be an easier and more politically prudent option, but a fair and efficient tax regime is the only way we will ever achieve a just and sustainable solution to our cash flow problem. It is time to wake up to the reality that taxes and fees for public services will need to rise or we will never be able to reform them. This will have to happen gradually for political, technical and social reasons but this government will have to be honest with itself and the people that the days of paying and receiving next to nothing in regards to essential public services are over.

It is simply unfair and unproductive to tax the rich and the poor indirectly through value added tax and excise taxes, while making excuses about a lack of infrastructure to impose or collect progressive and direct income taxes. People need to feel like they are paying for government in order to get angry enough to hold it accountable when it squanders their money. The culture of indirect taxes that has taken hold of this country has separated the people from their government while putting holes in their pockets.

As such, this government cannot continue to view telecommunications as a cash cow for the country. An indirect tax rate of 58 percent on phone bills is not a proper way to fund a government. Instead, the current telecommunications law needs to be applied, in full, and the private sector needs to be allowed to participate on an equal footing with the public sector. If there are parts of the law that need to be amended it can be done through a legal process. The need for such amendments should not be used as an excuse to skirt the obligation of implementing a law that comes from the elected representatives of the people.

With such reform, taxes in the sector could be shifted from being a burden on the consumer to a cost of doing business for private companies that compete against each other, and in so doing lower prices and provide more far-reaching services. The people, not the politicians and their companies, should get something out of privatization if it occurs. There is nothing wrong with a public share of the telecom industry — the same way there is nothing wrong with a private share — so long as the sector works for the people and their businesses and not for the interests of the zaims.

Once these basic elements of a modern economy are in place, the jobs needed to stem the brain drain will appear. But that will not be enough. The most elemental economic responsibility of any government is to create decent work for all citizens. This cannot be done without a national strategy for job creation from school to the workplace. That strategy must be as realistic as our expectations are for this government. Not everyone can be an employee in a high-value knowledge based industry. Some will need to be employed in vocational and industrial jobs, which are no less meaningful or important to the progress of the country.

The first element of that national strategy will need to involve a break with old habits. The government cannot keep funneling the poor into the army and the security services. It must create viable alternatives.

Similarly, qualified people should no longer be discouraged from working in the public sector. Our ministries and administrations are not tools for this government to practice patronage and a sectarian division of favors for votes. This government must formulate a strategy for civil service reform that is fair to those who have dedicated their lives to serve the nation and those who suffer from the lack of services.

The unqualified need to be trained and the incompetent need to go to make room for those who can do the job and deserve their position. Only then may we rightfully be able to expect a decent level of service from our public institutions.

The courts and corruption

Without question, these national strategies will mean nothing if they are not implemented and if the government is not held accountable. Despite suggestions to the contrary, it is not up to ministers whether or not they apply the laws.

The vote of confidence they receive from the Parliament obliges them to abide by the will of the people. The reason they have not done so, or have done so selectively, is the judiciary is so inefficient and politicized that we must rely on international tribunals to take up Lebanese affairs.

In order to address the problems of a judiciary that is anything but just, combating corruption must be a priority. The basic institutions for combating corruption have consistently been ignored by every post-civil war government to date, barring the implementation of one now-defunct presidential complaints office and a committee no longer in place.

Basic institutions, such as a national anti-corruption body and an ombudsman office, are essential, but so too is the reform of the current oversight bodies such as the Court of Accounts, the Civil Service Board and the Central Inspection Board. As long as these institutions and their budgets are assigned and overseen by the Prime Minister’s office they remain vulnerable to coercion and manipulation.

Learning to stand

It is naïve to think that all these basic elements of responsible government will be established by a cabinet that is manned and controlled by ex-warlords and businessmen with vested interests. But we should at least expect be moving in the right direction.

What many do not realize is that the larger issues — Hezbollah’s weapons, the Special Tribunal for Lebanon and sectarianism as a whole — are linked to a dysfunctional economy and government. A small country constantly subjected to barrages of local and international interests will struggle to protecting its national interests. But some geographically susceptible countries — like Singapore and Switzerland — have protected themselves by creating a strong and sustainable economy, which they use to shield against outside political manipulation.

Whether we can achieve such a reality will depend on how much the Lebanese are willing to accept the excuses that will, in all likelihood, arise when the tough decisions need to be made. As with the last government, it is entirely possible that this new government will attempt to hide behind concocted alibis and scapegoats to justify the continued ineptitude of the Lebanese state.

But before jumping to criticism, the new government is entitled to an opportunity to prove itself — give them a chance to do their job. And if they do not, at least we now know, without doubt, who to hold accountable, because there are no excuses left.